This Weekly Financial Markets Update reviews the top market headlines: Core Inflation Remains Stubborn, Small Business Optimism Hits 10-Year Low, Bank Lending Conditions Tighten

Top Three Market Headlines

Core Inflation Remains Stubborn: The U.S. Department of Labor reported last week that the Consumer Price Index (CPI) rose in April by 0.4% over the prior month, faster than the 0.1% pace documented in March. Product areas seeing the greatest price increases included shelter, used cars and trucks, and gasoline. Nonetheless, the annual inflation rate continued to ease as the CPI rose 4.9% over the prior year in April, the smallest increase in two years. However, the core CPI, which excludes food and energy products, remained elevated at an annualized rate of 5.5% in April, and has remained stuck in a range of 5.5% to 5.7% over the last five months.

Small Business Optimism Hits 10-Year Low: The National Federation of Independent Business (NFIB) reported last week that its Small Business Optimism Index declined 1.1 points in April to 89.0. This was the 16th consecutive monthly reading below the index's 49-year average of 98 and the lowest reading in a decade. Labor quality was the main concern for small business owners, with 24% reporting it as their most significant problem. Inflation came second at 23%, showing that this concern remains persistent. Approximately one in five small business owners surveyed plan to spend money on capital expenditures in upcoming months, a historically very weak level, according to the NFIB.

Bank Lending Conditions Tighten: Bank lending conditions tightened over the first quarter, according to the Federal Reserve's April Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) that was released last week. According to the report, 46% of banks tightened credit standards on commercial and industrials loans over the three-month period, up from 45% in the previous quarter and the highest reading since the third quarter of 2020. Banks also reported that demand for commercial real estate (CRE) loans weakened across all CRE categories.

As of May 15, 2023 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -0.42% 0.66% 8.02% 7.49%
S&P 500 -0.24% 0.53% 8.07% 6.76%
Russell 2000 -1.04% -3.29% -0.65% 1.64%
MSCI EAFE -0.67% 2.29% 10.95% 14.57%
MSCI Emerging Markets -0.86% -1.48% 2.42% 1.45%
FTSE NAREIT Equity -1.47% -0.32% 2.36% -6.71%
Bloomberg Commodity -1.62% -3.53% -8.71% -17.48%
Bloomberg U.S. Aggregate -0.23% 0.33% 3.30% -0.87%

US Bureau of Labor Statistics 5/10/2023, NFIB 5/9/2023, Bloomberg 5/9/2023, MarketWatch 5/8/2023. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Adviser that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.